Agenda-setting intelligence, analysis and advice for the global fashion community.
The Savigny Luxury Index (“SLI”) fell 3.2 percent this month while the MSCI edged down half a percent. Suspense kept on mounting around the controversial US tax reform and on Trump’s war of words with Kim Jong Un, while the EU and Britain continued to dilly-dally over Brexit. All of this uncertainty poured cold water over a string of largely positive results announcements. On balance US stocks did very well in November, whereas European luxury groups fell to the tune of five points with Swiss hard luxury players seeing an even higher decrease.
Big news
Results announcements this month continued to confirm that the luxury sector had finally turned the corner. E-commerce and China were, again, the main growth drivers: Tiffany, Burberry, Brunello Cucinelli and Hermès all saw their biggest sales gains in China, while Burberry also attributed its growth in the last six months to e-commerce.
Paris topped the global leader board of luxury boutique openings this year, seemingly brushing off the trauma of the 2015 terror attacks. The city saw a 15 percent uptick in tourism in the first half of the year, with Chinese tourist numbers increasing by 25 percent. London, which held the first position in 2016, fell to fourth place this year.
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Sidney Toledano left his post as chief executive of Christian Dior Couture to head LVMH's Fashion Division. His 20-year tenure at the helm of the legendary brand saw its sales grow tenfold. He will be replaced by the former chief executive of Fendi, Pietro Beccari. Richemont appointed a veteran insider to the newly created post of chief operating officer: Jerome Lambert, who is widely speculated to be next in line for the chief executive role.
Beauty dominated the luxury-deal landscape this month with four deals, three of which consisted of suppliers to the beauty industry, namely: Nu-World Corporation, a US-based research and development lab for cosmetics was acquired by Korea-based Cosmax for $50 million; Aircos, a France-based cosmetics manufacturer and supplier to leading beauty brands, was acquired by France-based Anjac with the company’s management retaining a 20 percent stake; Aromair Fine Fragrance company, a US-based supplier of fragrances to the cosmetics industry, was acquired by private equity-backed Canadian group Knowlton Development Corporation; and the fourth deal being the sale by Shiseido of US brand ReVive Skincare to US-based private equity group Tengram Capital Partners. In other segments, iconic premium writing instruments brand A.T. Cross was acquired by US-based private equity firm Transom Capital and Richemont Group acquired Italian leather goods manufacturer Stefano Serapian, with whom it already had a working relationship notably in watch straps.
Going up
- Michael Kors' second-quarter results beat analyst estimates due to a rebound in the US prompting a rally on the stock which ended the month almost 20 percent higher.
- Estée Lauder's share price rose almost 12 percent this month on the back of strong first quarter results and optimistic guidance on the upcoming holiday sales by the company. The American beauty group is getting a significant boost from the strong performance of the Millennial-friendly brands acquired in the last few years.
- Ralph Lauren rose just over 6 percent in November as its second-quarter results demonstrated that the company's turnaround was taking hold.
Going down
- Safilo's embattled share price declined a further 19 percent this month on the back of the impact of losing the Gucci license.
- Burberry fell almost 10 percent in November after incoming chief executive Marco Gobbetti announced a strategy to bring the brand more upmarket, the cost of which had not been anticipated by investors.
What to watch
Christmas stockings are likely to be fuller this year if the sales figures coming in from Thanksgiving, Black Friday and Cyber Monday are anything to go by. On the e-commerce front, the US has seen a 15 percent increase year-on-year in sales across the board for the period from Thanksgiving to Cyber Monday. Nevertheless, retailers have brought forward their promotional initiatives and extended their duration in order to capture more sales ahead of Christmas. As usual, there will be a tricky tango between sales growth and profitability this holiday season.
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